Thanks to unpredictable prices at the pump, energy-saving technologies, and the success of Al Gore and other experts in making us face “inconvenient” truths, consumers around the world are starting to talk about the environment as if they were discussing their own backyards (which, of course, they are). Concerns about the sustainability of resources and the safety of what we put into and on our bodies have become a staple of the mainstream media. As a result, green—the global catch-all term for everything good for the environment—has become a significant factor in where consumers shop and what they buy.

But will consumers continue to care about green issues now that the economy has taken a nosedive? That’s the question companies the world over are asking as they consider their past investments in green strategies and plan for the years ahead. The answer, our research convinces us, is a resounding yes. As the authors of this report explained in a recent related commentary in MIT Sloan Management Review, “As long as consumers continue to worry about energy costs and their budgets, and as long as they continue to be conscientious about the ingredients of their food and personal-care products, being green will be an attractive business.”

Our research also indicates that consumers greatly value the direct benefits that green products offer, such as superior freshness and taste, the promise of safety and health, and savings on energy costs. In an October 2008 survey on trading-up behavior, The Boston Consulting Group found that more consumers systematically purchased green products in 2008 than in 2007. (See Exhibit 1.)

Moreover, more consumers were willing to pay a higher price for green products deemed to be of higher quality. For example, although consumers everywhere are cutting back on big-ticket items in the face of a deep recession, they are reluctant to cut back on organic foods. In fact, when survey participants were asked in which product categories they were willing to trade up, they ranked organic foods 20 on a list of 108 product categories—considerably higher than the ranking of 43 they assigned to the category in a similar survey conducted in 2006. Organic has come to stand for better quality—an affordable luxury that is also good for you.

Of course, the actions a company takes on behalf of the environment must also be good for its bottom line—whether by bringing down costs or by offering product features that attract more consumers. Therefore the continuing expansion of green consciousness around the world presents a huge opportunity for smart companies, and the business case for green remains compelling even—and, in many cases, especially—in a tough market.

At its core, the green movement is about reducing waste and minimizing our impact on the environment. Companies that translate these goals into a holistic approach to offering differentiated green products and bringing down costs across the entire value chain have been rewarded with higher margins and market share.

Nevertheless, producers and sellers of green products still face some challenges. There is considerable confusion around the world about what being green really means. Because the industry lacks clear definitions and standards, some companies have been able to make sweeping and unsubstantiated claims about their environmental credentials. That has caused many consumers to become skeptical about green products, and companies to become wary of offering them. Companies are looking for business-minded approaches to protecting the environment that consumers will trust. But since consumers’ expectations for green products and production processes differ depending on where they live and the products they buy, companies must discover how targeted segments feel about the environment, what they expect from green products, and what prices they are willing to pay.

In July 2008, BCG conducted its Global Green Consumer Survey to assess green attitudes and shopping behaviors. We surveyed approximately 9,000 adults, aged 18 to 65, in nine countries through online questionnaires sent to respondents in Canada, France, Germany, Italy, Japan, Spain, the United Kingdom, and the United States and—in order to get a sense of the opinions of consumers in emerging markets—through face-to-face interviews in seven major cities in China. Our questions explored consumers’ awareness of environmental issues, their behavior when shopping for green products, their willingness to pay a premium for green products in more than 50 categories, and their perceptions of green retailers and brands. Finally, we interviewed executives at 20 leading consumer companies about their green strategies and experiences.

The results of our research clearly indicate that when it comes to being green, consumers hold companies to a high standard. First, they believe that companies can be more effective than private individuals in acting on green issues, including health and safety, and they expect companies to do so. But consumers are uncertain about exactly what that entails, and they want advice they can trust in evaluating product claims. Second, and contrary to what many managers believe, consumers are willing to pay a little more for some green products—even in times of tighter budgets—if they believe such products are healthier, safer, or better for the environment. Finally, most of the consumers we spoke with consider a store’s green credentials when choosing where to shop—a clear opportunity for savvy retailers.

Still, to attract more green shoppers, both retailers and manufacturers need to improve consumers’ awareness of green products and the choices available. Despite all the media attention the green movement has received, consumers remain unaware of green options in many categories and believe that the choices are limited when compared with conventional alternatives. Many consumers, for instance, complain about the “green ghetto” in the supermarket, where a limited assortment of organic products are crowded together in a low-traffic location.

Winning the hearts (and wallets) of green consumers is a wise move for producers and retailers. But going green is not merely a tactic for a single product or a discrete process. Rather, companies should strategically employ what we call the four Ps of green advantage: green planning, which incorporates green targets and resources into corporate strategy; green processes, which allow companies to practice what they preach; green product offerings; and green promotion and messages. (See Exhibit 2.) This report provides a window onto how consumers’ perspectives on green products and services are evolving and offers recommendations on how companies can meet their customers’ demands for a greener environment while also meeting their own business requirements.